Opening remarks by Governor Gabriel Makhlouf at Central Bank of Ireland Conference on “Trust & Innovation: the Future of Finance"

Good morning, and welcome to our conference on “Trust and Innovation: The Future of Finance”.

This morning’s event takes place on the sidelines of the Informal ECOFIN – an occasion that brings together many of Europe’s most experienced economic policy makers to discuss pressing questions.  And payments, I would argue, is exactly the right topic for this moment.

Payments are the circulatory system of the economy. When that system works – as it usually does, quietly and invisibly – money moves between people, firms and governments, enabling commerce, sustaining trade, and underpinning the welfare of societies.  In short, the payments ecosystem allows money to play that most fundamental role: a medium of exchange.

But payments are changing, and fast. New forms of payment instruments built around new technologies raise questions around settlement and  redemption, interoperability, and the implications for the structure of the broader financial system.  Digital payments have grown rapidly, but as we hear repeatedly from consumers, cash remains a valued payment option, even if it is being used less.

New entrants are emerging throughout the payment ecosystem – from digital banks to non-bank fintechs – now operating alongside traditional institutions at every stage of the transaction chain.  Interlinkages between the traditional financial system and tokenised finance are increasing, while the future role of stablecoins within the payments system remains uncertain; there are questions  around  monetary stability and financial resilience that need to be answered.

At the Central Bank of Ireland, our work on the payments system is an important part of our economic, policy and regulatory work. And we approach it from a clear starting point: trust.

Money has always been built on trust – a social, political and technocratic construct. A monetary system works best when there is no fragmentation across issuers or platforms – when exchange can occur on a “no questions asked” basis. That trust has been earned over decades, if not centuries, through careful monetary and regulatory stewardship. The challenge before us is to anticipate and respond to rapid change in a way that preserves what makes the system trustworthy, while enabling it to serve the economy of the future.

This challenge is best understood through the lens of the two-tier architecture of money – an architecture that has served the public interest well, and that must continue to do so.

In the first tier, public money must continue to play the anchoring role. Central bank money provides the unit of account and the settlement asset upon which the entire system rests. Private money operates effectively precisely because it is ultimately linked to, and convertible into, central bank money. By facilitating riskless settlement, enabling effective policy implementation, and acting as a tangible payment instrument for the public – one in which privacy is guaranteed – central bank money must remain at the heart of an inclusive and resilient modern economy.

To ensure that this continues, our Eurosystem infrastructure and policy environment needs to be fit for the emerging digital age.

Projects Pontes and Appia represent important steps: developing a DLT-based settlement capability that links distributed ledger platforms with TARGET Services, and building an innovative, integrated European ecosystem that facilitates safe and efficient operations at the global level.

That’s the wholesale side. On the retail side, public money in the form of cash, and soon its digital equivalent, the digital euro, must remain available across the economy to underpin the public’s trust that money is safe and references a common value.

In the second tier, the contribution of private money is equally essential. A monetary system that provides seamless payments, innovative services, and credit for productive investment – through good times and bad – is essential for long-term prosperity.

Private providers of payment services, including banks and the range of new entities that have emerged and continue to emerge, must be operationally and financially resilient to guarantee provision of core services.  Within a clear regulatory framework that prioritises safety and soundness, the private sector is positioned to innovate responsibly. Competition is to be welcomed when it provides greater choice, better quality service, or lower prices for consumers. This balance between safety and innovation is at the heart of our entire approach to regulation and supervision.

But resilience alone is not enough. Fragmentation – incompatible systems and competing standards – are risks that competition alone may not address.  That is why the Central Bank’s role extends beyond regulation. Through our role as operators of core payments infrastructure, we have a responsibility to actively shape the conditions under which the payments ecosystem as a whole can move forward together and best support a productive economy.

These are not merely abstract policy positions. They are questions that our own evidence is now helping to answer – and today, we are publishing new research that I want to draw your attention to.¹

To deepen our understanding of the evolving payments ecosystem, we have assessed its impact through four lenses: consumers, merchants, the financial sector, and the broader macroeconomic picture.

Our household survey reveals a fast-changing payments landscape.

• Close to half of all respondents under 35 now use mobile wallets as their primary payment method.
• Three in five Irish adults now use a digital or “neobank” alongside a longer-established bank, with a smaller younger cohort using digital banks exclusively.
• Where both types are used, digital banks are still predominantly used for payment functions rather than full banking services.

But the finding I want to pause on is this: when we ask consumers what matters most to them in choosing a payment instrument, the answer is not speed, convenience, or cost. It is security, reliability, trust, and fraud safeguards. That hierarchy of preferences is a clear message to everyone in this room and private sector firms introducing new products and services. Innovation that fails to honour that hierarchy will not earn durable public trust, however frictionless it may be.

At the same time, trust in digital banks is notably lower among respondents than trust in high-street banks – although these differentials are less pronounced among younger consumers, suggestive of the direction in which the market may gradually evolve.

For merchants, the picture is equally instructive. We have estimated the private cost borne by Irish businesses in processing retail payments to be at least €1 billion annually, around 0.3 per cent of GNI* or at least 1 per cent of underlying economic activity in the consumer-facing sectors of the economy. That is a meaningful cost, and the distribution matters as much as its level: smaller businesses face disproportionately higher per-transaction costs than larger ones, with the burden ultimately passed through to the prices consumers pay.

Efficiencies in the payments system also have broader macroeconomic implications – for how firms manage their liquidity, for how new markets open, and for international trade. There are costs to standing still. Recent ECB research finds that the potential gains from a faster, more integrated European payments ecosystem are large.  In a similar vein, the G20 work on its Cross Border Roadmap seeks to identify and remove frictions in cross-border payment flows.

To conclude, the future of the payments has not yet been written, but central banks and regulators will shape its evolution. We will do so in partnership with the private sector, enabling the innovation the economy needs, while safeguarding trust and stability on which the system depends.  

We have always had public and private money that co-existed, complemented and reinforced each other. The monetary system of the future need not be a departure from this, but rather an expanded framework in which both established and new forms of payment instruments can settle, be redeemed, be interoperable and be trusted.

The intertwined technical and strategic questions being discussed at this conference – about the role of central bank money, its settlement infrastructure and the digital euro, about tokenisation and  stablecoins, about what European autonomy in payments requires – are among the most consequential questions in economic policy today.

I look forward to hearing more throughout the morning.